Public Works Warehouse Inventory 9-2015BUDGET AND PERFORMANCE IMPROVEMENT
Internal Audit Division
TO:
VIA:
FROM:
DATE: June 10, 2016
INTERNAL AUDIT REPORT
AUDIT: Public Works Department's Warehouse Inventory Audit
PERIOD: Fiscal Year Ended September 30, 2015
This report is the result of a regularly scheduled audit of the Public Works Department's
warehouse inventory procedures, practices and valuation as of September 30, 2015, performed
in conjunction with the external auditor's annual financial audit of the City.
INTRODUCTION
The Public Works Department's warehouse located at 451 Dade Boulevard supplies materials
to all phases of Public Works operations (Water, Sewer, Storm Water, Engineering,
Environmental, Streets and Streetlights). These materials are received for and issued to the
various divisions where they are either charged to specifically assigned job orders or individual
vehicles.
As part of the inventory monitoring process, job order numbers are created to track the cost of
labor, materials and equipment used in projects performed by the Public Works Department; to
allow the department to know the cost of the projects; and to recover the cost of repair or
replacement of City property damaged by or caused by an outside party. Small materials and
equipment that are not job specific are charged to the individual truck numbers where the crew
is assigned for such personal items as tools, raincoats, etc. to record disbursement at no
charge. These items cannot be charged to a specific job and their issuance can be monitored
by warehouse personnel to help ensure that departmental employees are not being careless
with City property.
Received parts are accepted by warehouse staff and compared to the packing slip for
completeness. The charged prices are also checked against those quoted to confirm their
agreement. Once approved, the inventory is accepted, entered into the CityWorks Storeroom
module (CityWorks) and is paid through normal procurement channels. This infrastructure
management software was implemented by Public Works on April 1, 2006 following
authorization received via the adoption of City Commission Resolution No. 2006-26231.
Parts issued to authorized personnel are recorded on a CityWorks generated form which is then
signed by the appropriate parties. Among other information, these forms contain the date, job
order number, part number, quantity needed, part description, job location and issuer name.
The unit cost assigned to each item is based on the CityWorks' calculated weighted average
cost which factors in each made purchase of the item since 1984.
The City Commission's passage of Resolution No. 2012-27947 on July 18, 2012 authorized
Public Works to purchase a mobile inventory management system from Motorola Solutions Inc.
We are commilled to providing excellent public service and safety to all who live, work, and play in our vibrant, tropical, historic community.
Internal Audit Report
Public Works Department's Warehouse Inventory Audit
For the Fiscal Year Ended September 30, 2015
June 10, 2016
Additionally, Miles Technologies INVision Software is used to interface the Motorola's handheld
mobile computers to CityWorks by bringing the data entry device and bar coding to the location
of the materials which helps eliminate the usage of the MX-1 form and its subsequent entry by
warehouse staff into CityWorks. Although INVision was implemented in April 2014, some
transitional shortcomings are still being resolved as bar coding cannot yet be used for
processing received parts or to facilitate the physical inventory counts.
In addition to material receipt, storage and distribution, the warehouse occasionally orders,
maintains and supplies parts to outside contractors in support of other City capital projects. This
may occur in instances where either the outside contractor damages City materials during his
work (the contractor pays for materials ordered through a special budget code and work order),
or when the City agrees to supply the materials and the contractor provides the labor (the City
pays for both the materials and the labor).
Warehouse personnel currently consist of a Warehouse Supervisor, a Storekeeper II, a Buyer
and an Administrative Aide I with additional assistance received from a temporary contracted
laborer. These personnel also interact with the Procurement Division, Finance Department, and
vendors in the purchase and delivery of goods, inventory issuances and payments.
A majority of the inventory is stored inside the Public Works Department's warehouse at 451
Dade Boulevard. It is the department's largest and most secure facility as it is safeguarded by
cameras and locked alarmed doors. Other inventory storage locations on the property also
protected by cameras include the following:
• Yard 1 - A secure fenced area with a covered roof located directly south of the
warehouse at the bottom of the loading dock ramp used to safeguard such larger,
frequently issued items as selected clamps, valves, glands, etc.
• Yard 2 -A secure fenced area located south of Yard 1 behind the water tanks bordering
Miami Beach Senior High School. The items stored in this area consist primarily of light
poles, hydrants, pipe, offsets, and caps.
• Central Yard Area -City vehicles as well as assorted equipment and inventory (sand,
rock, sod, smaller pipes, etc.) are stored here.
Meanwhile, larger slower moving inventory was transferred to separate fenced facilities located
at 75 1h Street and Dickens Avenue and 81 51 Street and Hawthorne Avenue. Examples of
inventory stored in these facilities are pipes, bends, sleeves, crosses, offsets, light poles and
concrete bases.
A full physical count is performed at the end of each fiscal year by designated Public Works
Department personnel. Internal Audit subsequently conducts random test counts to verify the
accuracy of these counts, with any noted differences re-counted with an assigned staff member
until a consensus is reached as to the correct total. Once the final count is agreed upon, staff
records the quantity on hand figures accordingly in CityWorks. Upon completion of all needed
entries, a new fiscal year end value is calculated through the generation of a system report.
Finally, this total value is forwarded to the City's Finance Department which prepares a journal
entry to adjust the applicable general ledger inventory balances.
The Public Works Department's warehouse inventory was valued at the following rounded
amounts for the five most recent fiscal years:
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Internal Audit Report
Public Works Department's Warehouse Inventory Audit
For the Fiscal Year Ended September 30, 2015
June 10, 2016
9/30/2011 9/30/2012 9/30/2013
$2,436,374 $2,120,551 $1,899,775
9/30/2014 9/30/2015
$2,023,836 $2,315,686
This 2014/15 fiscal year ending inventory of $2,315,686 was 14.42% higher than the previous
fiscal year's total due primarily to the need to restore previously low inventory levels to more
acceptable levels according to warehouse management. Internal Audit conducted test counts of
192 part numbers totaling 14,610.60 items with a cumulative value of $759,458.23 or 32.80% of
the current inventory value.
OVERALL OPINION
Based upon the results of the test counts and the furnished inventory reports, Internal Audit
recommends that the valuation of $2,315,686.13 be used as the September 30, 2015 inventory
value. The annual physical inventory was conducted effectively with the corresponding
valuation deemed reasonable. In conducting our physical test counts and reviewing the
implemented internal controls, we identified the following areas that are in need of improvement
• Monthly journal entries for inventory adjustment (number 005) were not necessarily
accurately or timely calculated resulting in misstated general ledger account balances.
• A comparison of the CityWorks Storeroom module's (CityWorks) book counts with
Internal Audit's verified sampled physical counts identified 34 differences totaling a net of
$10,818.52 which at 17.71% (34/192) continues to be above the desired maximum
internal goal of 10.00%. Contributing factors to this overage include the occasional input
errors resulting from non-systematically assigned part numbers, non-uniform parts'
measurement units, etc.
• CityWorks and INVision Software System shortcomings need to be addressed to better
satisfy the warehouse's operational needs.
• Inventoried parts were not reviewed for obsolescence prior to the start of inventory which
could result in a misstated fiscal year end valuation. Also, previously charged out parts
that were returned after extensive usage are scattered throughout the warehouse yard
and may be able to be disposed of.
• Shortcomings in the camera system protecting the City's assets stored at 451 Dade
Boulevard were noted.
• Security deficiencies are identified that could allow unsupervised and/or unauthorized
access to City assets thereby increasing the likelihood that they could be damaged or
misappropriated.
• Warehouse standard operating procedures did not sufficiently depict current warehouse
operations.
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Internal Audit Report
Public Works Department's Warehouse Inventory Audit
For the Fiscal Year Ended September 30, 2015
June 10, 2016
PURPOSE
The purpose of this audit is to determine whether the Public Works Department's warehouse
inventory is sufficiently counted, valued and recorded; properly safeguarded from theft and
breakage; and that tested entries are correctly recorded in the City's Financial System.
SCOPE
1. Confirm that documented standard operating procedures exist that are followed to help
ensure efficient and effective administration of the warehouse.
2. Confirm that tested inventory items are stored in an orderly manner, are clearly labeled,
are properly safeguarded and are reasonably valued.
3. Confirm that the physical inventory was performed in an efficient, effective and timely
manner with sufficient personnel and adequate procedures to ensure an accurate count.
4. Confirm by test counts that the final inventory report accurately reflects the final
inventory valuation and that this information is correctly reported in the City's Financial
System.
FINDINGS, RECOMMENDATIONS AND MANAGEMENT RESPONSES
1. Finding -Journal Entry Number 005's Monthly Entries were not Necessarily Accurately
or Timely Calculated Resulting in Misstated General Ledger Account Balances
Prior to December 1, 2012, general ledger account number 191-4400-000481 (Inventory
Purchase MX Stock) was debited and the MX Stock pooled cash account credited when
the warehouse purchased inventory by City check through purchase orders and
Requests for Direct Payment. The monies were subsequently reclassified or assigned
to the appropriate divisions as designated by warehouse personnel in the CityWorks
Storeroom module (CityWorks) when the inventories were issued or charged out with the
corresponding pooled cash accounts also adjusted. These adjustments were done via
monthly journal entry number 005 by the Finance Department based upon data received
from the CityWorks generated Warehouse Issue Report Summary.
These reclassification entries were needed because warehouse personnel do not
necessarily know who will ultimately use the inventory at the time of purchase as some
parts may be used by a number of different divisions at a later date (bolts, screws, etc.).
Therefore, this Inventory Purchase MX Stock account was continually decreasing as
parts were issued until the balance was so low that the account needs to be replenished.
In summary, this accounting process was changed effective December 1, 2012 to as
follows:
• Parts purchased after December 1, 2012 were to be distinctly labeled as such by
warehouse personnel upon receipt of the goods. Instead of debiting the
Inventory Purchase MX Stock account at this time, the appropriate Public Works
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Internal Audit Report
Public Works Department's Warehouse Inventory Audit
For the Fiscal Year Ended September 30, 2015
June 10, 2016
divisional general ledger accounts projected to use these goods were now to be
debited.
• Parts continue to be given out to departmental staff and contractors as needed.
Warehouse personnel are to intentionally dole out all non-labeled parts available
first before providing the more recently purchased labeled parts.
• All issued parts that were purchased after December 1, 2012 were to be noted
on the departmental MX-1 form in effect until May 2014 when bar coding was
implemented.
• The Warehouse Issue Report Summary cannot distinguish between issued parts
that were purchased prior to December 1, 2012 and those that were not. If no
adjustments were made, the issuance of parts purchased after December 1,
2012 would be recorded twice in the City's Financial System (once at the time of
purchase and again at the time of issuance). Consequently, the Warehouse
Supervisor has to review all the parts issuances and remove any of these more
recently purchased items from the subsequent journal entry.
Additional adjustments may be needed for any post December 1, 2012
purchased inventory that was eventually used by a different division than the one
projected at the time of the purchase. An Excel spreadsheet was to be prepared
monthly totaling the needed adjustments by the applic<iible general ledger
account numbers.
• This Excel spreadsheet along with the Warehouse Issue Report Summary is to
be timely sent to the Finance Department so that monthly journal entry number
005 could be completed.
• The Warehouse Supervisor is to maintain all the supporting documentation (MX-
1 forms, packing slips, etc.) that could be provided if requested as they were not
sent monthly to the Finance Department due to their large volume.
The Warehouse Supervisor implemented these changes and began submitting the
corresponding voluminous monthly journal entries to the Finance Department. However,
the date that the charged out item was actually purchased (prior or after December 1,
2012) could not be indicated through the bar coding as it was on the previously manually
prepared MX-1 forms.
As a result, each part charged out was reviewed in CityWorks to determine the most
recent purchase date. If the date was prior to December 1, 2012, then no adjustments
were needed. If the date was after December 15
\ then it was assumed that the issued
part was purchased at that time although there may have been parts present from earlier
purchases. Therefore, the monthly journal entry #005 may or may not be accurate but it
is the easiest way to calculate under the current conditions.
Finally, no documentation was provided verifying that February 2015's journal entry
#005 was posted. Also, October 2014 through January 2015's reviewed entries were
not recorded timely in the City's general ledger.
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Internal Audit Report
Public Works Department's Warehouse Inventory Audit
For the Fiscal Year Ended September 30, 2015
June 10, 2016
Recommendation(s):
The Warehouse Issue Report Summary and corresponding Excel spreadsheets should
be submitted timely each month to the Finance Department so that journal entry number
005 can be processed to adjust the applicable general ledger account balances as
needed. Also, warehouse staff should try and determine a more accurate way to
determine the actual purchase date of the issued item so that the correct entries are
made.
Management Response (Public Works Department):
A reconciliation will be sent to the Finance Department within five days of month close.
Management Response (Finance Department):
The Public Works Department is submitting the corresponding Excel spreadsheet timely
each month to reclassify inventory items originally purchased with MX Stock fund 191.
2. Finding -Sampled Part Numbers' Verified Counts Differed from CityWorks Totals for
17. 71% of the time which Exceeds the Desired Internal Maximum Goal of 10. 00%
The Warehouse Supervisor generated a CityWorks report on September 18, 2015 of all
Public Works inventory that was supposedly present. Theoretically, the listed counts
should be identical to the inventory on hand as CityWorks uses the perpetual inventory
method meaning that the part's inventory balance is increased or decreased accordingly
as parts are received or issued. Upon generation of this report, warehouse staff began
their physical inventory counts.
After stratifying this report's population by extended value (stock on hand x unit cost),
192 part numbers were randomly selected consisting of 14,279.40 units with a total
extended value of $759,458.23. Internal Audit's test counts for these parts were
compared to Public Works staff's physical counts and if they agreed then the
corresponding total was used as the final count. If they differed, then the part was
counted again with a designated warehouse employee until a consensus was reached
as to the total. This verified count was then used as the basis for the sampled part's
inventory valuation.
A comparison of the physical counts found differences for 34 of the 192 sampled part
numbers or 17.71%, which is less than last year's 21.29% but is still more than the
desired 10.00% maximum goal. The corresponding net valuation difference was
$10,818.52 as sometimes the CityWorks reported amount was higher and other times
the verified physical count was higher. Where necessary, the Warehouse Supervisor
adjusted the CityWorks reported inventory totals to reflect the results of the full inventory
physical counts, including Internal Audit's test counts, to help ensure that valuation is
reasonably correct as of September 30, 2015.
However, Public Works Department management does not receive a system report of all
the changes made on the population to determine their magnitude and to increase staff
accountability. Also, they have been unable to determine the root causes for these
differences (shrinkage, improper recordkeeping, unsupervised access to inventory, etc.)
so that the necessary changes can be made to help prevent future occurrences.
Regardless, the following factors noted during testing most likely contributed to this
17.71% difference:
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Internal Audit Report
Public Works Department's Warehouse Inventory Audit
For the Fiscal Year Ended September 30, 2015
June 10, 2016
a. Warehouse staff has to ensure that the appropriate entries are made into
CityWorks to help ensure that part numbers' valuations are accurate which
ultimately affect their charging out and inventory value. For example, a
$124,800.00 overstatement associated with part number ZWIR-O?'s total value
was identified as it was incorrectly assigned a $63.03 unit cost in CityWorks
when it actually should have been $0.63. Although this mistake does not affect
the aforementioned 17.71% calculated difference, it would still affect the part's
carrying value and the price at which it's charged out.
In addition, warehouse staff may have initially assigned part numbers logically
but over time as new parts were added they have become confusing, not
necessarily consistent and can be easily mistaken. For example, there are
currently eleven different parts starting with ZFIX-01 which more concisely
includes ZFIX-01.8, ZFIX-01.8A, ZFIX-01.84 and ZFIX-01.85 whereby the
inadvertent omission or inclusion of a number or letter could result in the
incorrect part number being received or charged out.
Another potential concern is that most parts are charged out on a per unit basis
but some are based on the whole box, the number of feet, etc. which can lead to
inaccurate entries. For example, some pipes such as PIP-27.5, PIP-35, PIP-
40.8, PIP-58, etc. are priced by the foot but others are based by the full length
piece (PIP-20.6, PIP-30.C, PIP-35.C, PIP-41.2, etc.).
b. The Public Works Department warehouse closed for inventory on September 15,
2015 at 2:00pm. All staff was notified on September 3, 2015 to charge out all
projected needed parts through the end of the month to minimize disruptions to
warehouse personnel. These items were then safeguarded in less secure
divisional store rooms, on departmental vehicles, etc. until either being used or
returned to inventory once the warehouse resumed normal operations.
Additional parts after the warehouse closed were to be issued only for
emergencies pending the Infrastructure Division Director or his designee's
approval. Despite these instructions, 35 different part numbers totaling 903 units
and $34,620.34 were charged out between September 15th and September 30th,
2015 (the date that inventory was finished and the warehouse resumed normal
operations). The issuance of parts while the warehouse is closed complicates
the inventory process as they can impact the accuracy of the valuation based
upon when they were issued (before or after Public Works physical count, before
or after Internal Audit's test counts and before or after any mutually agreed upon
verified counts).
c. Part numbers were not always stored together or were commingled with other
parts thereby potentially hindering quantifying which could impact the physical
count and ordering. For example, pipes, bends, etc. were found intermixed with
other parts especially at the 75th Street and Dickens Avenue location.
Furthermore, a few sampled parts were found in more than one storage facility
(examples include part numbers ZBAS-1 0 and PIP-30.5).
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Internal Audit Report
Public Works Department's Warehouse Inventory Audit
For the Fiscal Year Ended September 30, 2015
June 10, 2016
Similarly, two parts were found to have the incorrect storage location listed during
test counts. One of these, part number ZCLM-04.2, was incorrectly assigned a
unit count of 0 during staff's physical count rather than its actual 23 as confirmed
by Internal Audit.
Recommendation(s):
The compensating control of performing full scale physical inventory counts should
continue to be performed as this fiscal year's 17.71% difference exceeds the desired
10.00% maximum goal. In addition, the implementation of the following
recommendations should help reduce this percentage to more acceptable levels in
future fiscal year inventories:
a. All warehouse staff's CityWorks entries should be timely reviewed and approved
by the supervisor given their potential material impact on inventory's recorded
carrying value. The currently assigned part numbers should also be revised to
give a better description of the item and be distinct from others so that the
inadvertent omission of a number, letter or asterisk won't necessarily result in an
incorrect part number being charged thereby adversely affecting two different
recorded quantities. Lastly, part numbers' unit measures should be consistently
and uniformly applied to help reduce any potential confusion and the possibility of
mistakes.
b. Public Works Department management and warehouse staff should meet to
determine how the inventory process could be further shortened and how to
minimize the number of parts needing to be charged out during the physical
inventory count. Possible options include more automation, supplementing the
number of departmental employees involved in the counting process, having
management verify that sufficient parts are charged out prior to the start of
inventory, confirming that any subsequently needed parts truly represent an
emergency before they are issued, etc.
c. Although a continuous struggle due to space limitations, unsupervised access to
certain inventory, etc., similar parts should be grouped together with an accurate
storage location listed to facilitate identification and quantifying.
Management Response (Public Works Department):
The Public Works Department is in the process of documenting the counting procedure
by September 30, 2016 and will include shortening of the counting process from two
weeks, and developing an inventory count standard operating procedure. Inventory
parts will be re-assigned and properly labeled with short descriptions of each part. The
warehouse will be re-organized to where parts are set up alphabetically then
numerically. This process will provide accuracy in recording quantities. In addition, all
employees will be trained on how to properly enter inventory into City Works. A sample
count will be taken quarterly to ensure accurate inventory count which will reduce the
length of time during year end count. During this time an average of weekly parts usage
will be taken and set aside for any emergency and service request. The reorganizing of
parts should create additional space, allowing all parts to be properly grouped together
within a precise storage location.
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Internal Audit Report
Public Works Department's Warehouse Inventory Audit
For the Fiscal Year Ended September 30, 2015
June 10, 2016
3. Finding -Inventory Software Shortcomings Need to be Addressed to Better Satisfy the
Warehouse's Operational Needs
The Public Works warehouse implemented a mobile inventory management system
purchased from Motorola Solutions Inc. in April 2014 called INVision to interface the
handheld mobile computers to the CityWorks Storeroom module (implemented on April
1, 2006) by bringing the data entry device and bar coding to the location of the materials.
Inquiries with warehouse staff and a cursory review of the two software systems
identified the following shortcomings during testing in the CityWorks and INVision
sections:
CityWorks
a. Inventory items continue to be valued using a weighted average costing
approach that supposedly includes all purchases made of the parts since 1984.
Technology advancements and component materials' price changes have
caused some parts most recent purchase prices to vary both negatively and
positively from the recorded weighted average prices. As a result, fiscal year-
end inventory valuations continue to be impacted.
For example, it was determined that 37 of the 192 sampled parts have not been
purchased since April 1, 2006's CityWorks inception. Of the remaining 155
sampled part numbers, a comparison of the most recent purchase price with the
weighted average price listed in CityWorks found that 15 parts' percentage
difference exceeded 20.00%, either higher or lower. The largest difference noted
was 150.51% for part number CLM-80.5 as its most recent purchase price of
$385.78 was $231.78 more than the listed CityWorks weighted average cost of
$154.00.
b. Maximum and minimum quantities are not currently recorded in CityWorks to aid
staff in ordering. The warehouse supervisor or his/her designee could then
generate a daily report alerting them as to what part numbers have fallen below
the minimum threshold and as to the corresponding quantity to be ordered. In its
absence, ordering continues to be done manually as staff becomes aware which
could lead to inadvertent stock outs or overstocks thereby negatively affecting
carrying costs and inventory turns.
c. Cityworks does not currently track whether each part number in inventory is to be
recorded in the general ledger as belonging to water and sewer; streets and
streetlights; or tools and supplies. As a result, staff has to undertake the time
consuming annual process of reviewing each part number and project who the
end user will be so that the proper accounts can be impacted.
INVision
d. The INVision System only recognizes the charging out of whole numbers (1, 2, 3,
etc.) and not decimals. Therefore, items such as rock, asphalt, sand, etc. that
are usually disbursed in other than whole numbers (ex. 1.25, 2.52, etc.) have to
be issued on a manually prepared MX-1 form and directly entered into CityWorks
bypassing INVision.
e. The INVision System does not transmit the receipt of goods through either
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Internal Audit Report
Public Works Department's Warehouse Inventory Audit
For the Fiscal Year Ended September 30, 2015
June 10, 2016
delivery or return of previously issued inventory properly to CityWorks. The
identified short term solution has been to enter the received goods directly into
CityWorks which will then communicate the corresponding entries to INVision.
Similarly, the bar coding function cannot be used yet to facilitate the labor
intensive physical inventory count completed annually. The City's GIS Manager
expects that these functions should become operational later this fiscal year
when the transition to a new web based version of CityWorks is complete.
Recommendation(s):
Plans to convert from the current continuous weighted average inventory valuation
method to FIFO, LIFO, specific identification, etc. should be pursued so that the listed
valuations more accurately reflect the actual value of the inventory currently in stock.
Also, all desired CityWorks and INVision changes should be prioritized and sent to the
City's GIS Manager and the vendor for their review and comments. Staff may also need
additional software training to help implement these changes and to learn about the
availability of other system functions not known or utilized. Finally, the proposed
conversion to a new web based version of CityWorks should be completed as soon as
possible to aid warehouse staff in the completion of their duties.
Management Response (Public Works Department):
The Public Works Department is seeking options in INVision to change from weighted
average inventory valuation to either FIFO. This will require upgrades to the current
software and additional training on how to use this software efficiently.
4. Finding -Parts were Not Reviewed Prior to the Start of Inventory to Determine if Any are
Obsolete and can be Removed from the Physical Count Valuation and/or Disposed of
In selecting its random sample stratified by extended value to confirm the Public Works
Department's physical count and valuation, one of the items tested was part number
PIP-55.9 whose extended value of $56,330.10 is the second highest behind MTR-07.4's
extended value of $60,353.60. Closer analysis shows that none of this 16" TR flex
epoxy lined pipe was charged out during the 2014/15 fiscal year and that only one 18.6
foot length piece has been charged out during the past seven fiscal years. Unaware as
to its projected need and future availability, it seems that this part's large inventory
balance may be excessive and can be reduced.
Subsequent inquiries with staff found that inventoried parts are typically not reviewed
annually to determine if any can be disposed of as items are usually only scrapped if
they are broken and cannot be salvaged. After the completion of the inventory, Internal
Audit requested and received a listing of parts that have not been issued or charged out
during the past five fiscal years. In reviewing this report, it was found that 570 different
part numbers totaling $248,323.43 met these criteria and continue to be carried in the
warehouse's inventory valuation when they may be obsolete.
In addition, the Public Works yard contained several sections where charged out
hydrants, meter boxes, meter covers, etc. have been returned after extensive usage in
case any parts are subsequently needed. These parts are not brought back into
inventory and their numbers are escalating occupying valuable ground space where they
can be accessed by anyone. Similarly, there was a large pile of unusable public
telephones stored in the yard that are in need of being scrapped.
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Internal Audit Report
Public Works Department's Warehouse Inventory Audit
For the Fiscal Year Ended September 30, 2015
June 10, 2016
The September 30, 2015 generated CityWorks report listed 953 active part numbers with
a $0.00 extended value representing 19.08% of the 4,996 total assigned part numbers
which is an increase over last fiscal year's 909 parts.
Recommendation(s):
At a minimum, the Public Works Department should generate this non-issuance report
and review its listed parts prior to the start of inventory to determine if any quantities can
be reduced or the parts are obsolete and can be sold to another City, recycled, used in a
CIP project, scrapped, etc. Otherwise, the continued storage and safeguarding of any
unneeded or obsolete parts inflates the total inventory value, occupies valuable space,
ties up departmental monies, etc. Also, guidelines should be established concerning the
return of charged out used parts to determine if they have value or are obsolete and
should be disposed of. Finally, warehouse management should review the 953 part
numbers with a $0.00 extended value to determine if any are no longer used and can be
removed from CityWorks.
Management Response (Public Works Department):
The Public Works Department is in the process of documenting the counting procedure
by September 30, 2016 and develop an inventory count standard operating procedure.
The department will identify a tagging system within the documented inventory
procedures that will separate obsolete parts from parts in current use. In addition, all
parts that have been purchased before the year of 2012 will be reviewed. If these parts
are considered to be obsolete, parts will be recycled or sold which will increase space
and decrease the margin of discrepancies.
Note: Some parts that are before this time frame may seem to be obsolete by the time
frame standards. When in actuality, these parts are still functional and useful in
emergency situations based on the type of material that we have presently in the
ground.
5. Finding -Security Cameras Deficiencies Were Noted Which Require Attention
The Public Works facility located at 451 Dade Boulevard is currently monitored by thirty-
five digital cameras to record daily activities. The system hardware, computer monitors
and digital video recorders are adequately safeguarded in the continuously staffed
Control Room. These cameras are primarily used as a detective measure to be
reviewed after an incident has occurred to help determine fault.
Sixteen cameras' activities can be viewed on a computer monitor called "Bank 1",
sixteen more are visible on "Bank 2" and three are on "Bank 3". As funding permits,
departmental management may elect to install additional cameras to "Bank 3" to cover
such needed areas as the warehouse counter, inside the electrical room, etc.
Review of all these cameras during a Tuesday October 13, 2015 site visit found that
Bank 1, Camera 2; Bank 1, Camera 15; Bank 2, Camera 1; Bank 2, Camera 3; and Bank
2, Camera 13 were very blurry and in need of repair. Furthermore, Bank 2, Camera 12's
recordings were partially blocked by tree branches that need to be cut back. When
asked, Control Room staff stated that the cameras occasionally have to be reset due to
power surges which could limit their effectiveness. Finally, there is no blueprint or
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Internal Audit Report
Public Works Department's Warehouse Inventory Audit
For the Fiscal Year Ended September 30, 2015
June 10, 2016
template documenting the cameras location and areas covered to facilitate identifying
which if any are not functioning properly, where they are positioned, what areas they
cover, etc.
Recommendation(s):
The positioning and effectiveness of the cameras should be continually reviewed to
maximize their benefit to the City. With the purchase of the digital video recorder for
"Bank 3", management should determine whether there is a need and funds available to
purchase additional cameras to better protect noted strategic blind spots. A Pinnacle
representative should be dispatched to fix the five blurry cameras while Public Works
staff should cut back the tree branches blocking Bank 2, Camera 12's view. To
compensate for the occasional power surges, Public Works should consider investing in
a new power surge protector/back UPS. Finally, a blueprint or a template should be
maintained showing the location of each camera.
Management Response (Public Works Department):
The Public Works Department will make contact with the Pinnacle representative to
determine the repair and/or maintenance of the cameras. The department will also
develop a template that identifies the location of each camera.
6. Finding -Security Deficiencies are Identified that Could Allow Unsupervised and/or
Unauthorized Access to City Assets
An October 12, 2015 site visit identified the following fencing and lock deficiencies at the
designated locations that increases the possibility that City assets may be
misappropriated, damaged or vandalized:
a. The 81st Street and Hawthorne Avenue (81st Street) facility's perimeter fence
continues to be secured with a standard 3252 model lock. Numerous Public
Works Department personnel have the master key and therefore can obtain
unsupervised access to the facility and its limited contents. On a positive note,
fewer heavy slow moving parts are stored on the premises as many items have
been transferred to other facilities.
b. Although the 75th Street and Dickens Avenue (75th Street) facility is better
secured with a Medeco lock, pump shop staff also were given keys to run
needed tests on the water, make necessary repairs, etc. thereby granting them
unsupervised access to the inventory stored on the premises.
c. Despite the recent installation of a new perimeter fence at 751h Street, soil erosion
as created several places whereby intruders could crawl underneath and gain
access to the facility.
d. Gaps in the fence large enough for unauthorized intruders to enter were found in
the northwest corner of yard 2 and in the northeast corner of the 451 Dade
Boulevard facility bordering the par 3 golf course and the Rabbi Alexander S.
Gross Hebrew Academy.
e. A large hole lies exposed and uncovered near the northeast corner's perimeter
fence of 451 Dade Boulevard thereby creating a safety hazard.
Page 12 of 14
Internal Audit Report
Public Works Department's Warehouse Inventory Audit
For the Fiscal Year Ended September 30, 2015
June 10, 2016
Recommendation( s):
The implementation of the following recommendations should help better protect the
City's assets stored at the tested Public Works facilities:
a -c. Despite the continuous struggle to keep intruders from ga1mng unauthorized
access to the 75th and 81 st Street facilities, greater precautions and periodic
security reviews should be implemented to better prevent unsupervised entry.
Possible changes to consider include adding fencing to separate the 75th Street
inventory from the pump station, installing cameras, transferring inventory from
these remote locations to 451 Dade Boulevard, repairing any soil erosion, etc.
d-e. Any gaps or holes in the perimeter fencing and pavement of 451 Dade Boulevard
should be repaired to help prevent unauthorized access and/or inadvertent
injuries.
Management Response (Public Works Department):
The Public Works Department has fixed the holes in the perimeter fencing of 451 Dade
Boulevard and will identify the areas at 75th and 81st Street facilities that need additional
repairs to prevent unauthorized access.
7. Finding -Warehouse Standard Operating Procedures Need to be Expanded and
Updated to Better Depict Current Operations
Standard operating procedures serve both as a benchmark to measure individuals'
performance and as an instruction manual in the event employees' change. The
reviewed Public Works Department were found to be rudimentary and lacking sufficient
detail as noted limitations concerned entries into CityWorks and the usage of its
available reports, the steps by which an accurate inventory is to be performed, the need
to submit a detailed Bill of Materials prior to the beginning of large projects to help
ensure that needed parts are present, the usage of bar coding, etc.
Recommendation(s):
Departmental standard operating procedures should be continuously expanded and
updated as needed to accurately describe current warehouse operations.
Management Response (Public Works Department):
The Public Works Department is in the process of documenting the counting procedure
by September 30, 2016 and develop an inventory count standard operating procedure.
EXIT CONFERENCE
An exit conference was held on April 18, 2016 in the Office of Budget & Performance
Improvement. Participants included John Shumaker (Deputy Finance Director), Sara Patino
(Financial Analyst Ill), Roy Coley (Infrastructure Division Director), Girlande Bertrand (Office
Associate IV), George Corchado (Warehouse Supervisor), Shirley Thomas (Buyer), Keary
Cunningham (GIS Manager), James Sutter (Internal Auditor) and Mark Coolidge (Senior
Auditor). All parties were in agreement as to the contents of this report. Management
responses were solicited and included in our report.
Page 13 of 14
Internal Audit Report
Public Works Department's Warehouse Inventory Audit
For the Fiscal Year Ended September 30, 2015
June 10, 2016
JJS:MC:mc
Audit performed by Mark Coolidge (Senior Auditor)
F:\OBPI\$AUD\INTERNAL AUDIT FILES\DOC15-16\REPORTS-FINAL\PUBLIC WORKS INVENTORY RPT 2015.docx
cc: Eric Carpenter, Assistant City Manager
Roy Coley, Infrastructure Division Director
Allison Williams, Chief Financial Officer
John Shumaker, Deputy Finance Director
Page 14 of 14